Representation of the Z Trusts [2015] JRC 196C (23 September 2015)

Representation of the Z Trusts [2015] JRC 196C (23 September 2015)

The appointment of additional trustees by Madame C was set aside because, in the context of the Z II Trust's insolvency, her fiduciary power to appoint trustees could only be exercised in the interests of all creditors as a class. The evidence showed the appointments were made to benefit the beneficiaries and majority (connected) creditors, not all creditors, and without the consent of all creditors or the Court. This was a misuse of the fiduciary power and contrary to the duties owed in insolvency.

Citation
[2015] JRC 196C
Parties
Seventh Respondent / Appointor / Beneficiary / Applicant: Madame C; Representor / Trustee of Z II Trust: Volaw Trustee Limited; Original Trustee / Creditor / Respondent: Equity Trust (Jersey) Limited; Sixth Respondent / Proposed Trustee / Creditor: Rawlinson & Hunter Trustees SA; Proposed Trustee: Pan-European Management (PTC) Limited; Trustee of Z III Trust / Respondent: Barclays Private Bank & Trust Limited
Jurisdiction
Jersey
Judgment Date
23 September 2015
Procedural Posture
Representation / Application for Directions / Judgment on Validity of Appointment of Additional Trustees to Z II Trust
Outcome
Appointment of Rawlinson & Hunter and Pan-European as trustees of the Z II Trust set aside.
Legal Topics
Fiduciary Powers, Appointment of Trustees, Insolvent Trusts, Fraud on a Power, Duties to Creditors Vs Beneficiaries
Trusts and Estates Insolvency Law Fiduciary Powers Appointment of Trustees Insolvent Trusts Fraud on a Power Duties to Creditors Vs Beneficiaries

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Parties

Madame C

Seventh Respondent / Appointor / Beneficiary / Applicant

Volaw Trustee Limited

Representor / Trustee of Z II Trust

Equity Trust (Jersey) Limited

Original Trustee / Creditor / Respondent

Rawlinson & Hunter Trustees SA

Sixth Respondent / Proposed Trustee / Creditor

Pan-European Management (PTC) Limited

Proposed Trustee

Barclays Private Bank & Trust Limited

Trustee of Z III Trust / Respondent

Procedural Posture

Representation / Application for Directions / Judgment on Validity of Appointment of Additional Trustees to Z II Trust

Legal Issues

  1. 1 Whether the appointment of additional trustees to the Z II Trust by Madame C was valid in the context of the trust's insolvency
  2. 2 Whether the power to appoint trustees was exercised in accordance with fiduciary duties owed to creditors of an insolvent trust

Ratio Decidendi

The appointment of additional trustees by Madame C was set aside because, in the context of the Z II Trust's insolvency, her fiduciary power to appoint trustees could only be exercised in the interests of all creditors as a class. The evidence showed the appointments were made to benefit the beneficiaries and majority (connected) creditors, not all creditors, and without the consent of all creditors or the Court. This was a misuse of the fiduciary power and contrary to the duties owed in insolvency.

Court Disposition

Appointment of Rawlinson & Hunter and Pan-European as trustees of the Z II Trust set aside.

Orders

  • The appointment by Madame C of Rawlinson & Hunter and Pan-European as trustees of the Z II Trust is set aside.
  • Volaw remains trustee of the Z II Trust until further order or agreement.